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Competing with your customers as you grow

A conversation taking place among colleagues over at the Kellogg innovation blog/web forum (http://marketdrivengrowth.blogspot.com) has to do with how you can move into spaces that are occupied to some extent by your customers,with the goal of making the whole pie larger for everyone. The dilemma is that customers can mistrust your motives, but at the same time you need them to get whole ecosystems going or to develop certain kinds of innovation. It’s a point that we often make – you have to create a whole product or solution before anybody will buy anything.

One key issue that has been raised by both Clayton Christensen and Geoffrey Moore is that success of a more or less vertical integration strategy depends heavily on the evolutionary stage of your industry—in new spaces, vertically integrated players tend to win out. In more commoditized spaces, advantage can go to specialists. The shift inevitably causes channel conflict and some dismay.

Here was my response:

One technique we have had good success with is using ‘discovery driven
planning’ to model the possible outcome
of a cooperation and show potential partner/competitors what the outcome
could look like in the event of success. You can also show the
checkpoints at which you could stop further development if things go
adversely for either party.

Somewhat more aggressively, if you can identify low-power partners who
stand to gain more from partnering with you than a better established
player can, you can benefit by leveraging their capability to create a
new space / ecosystem and eventually bring the larger players into your
orbit in the interest of not being locked out of the now-attractive
area.